IMMIGRATION
November 20, 2025
7:05 pm

Understanding Rental Income Taxation in Cyprus: A Complete Guide for Property Owners

Cyprus has become an increasingly popular destination for property investment, attracting both European and international buyers seeking rental yields in a Mediterranean setting. Whether you’re considering purchasing residential property for letting purposes or already own real estate generating rental income, understanding the tax treatment of these earnings is essential for compliance and financial planning.

The island’s taxation framework for rental income offers several advantages compared to other European jurisdictions, particularly when combined with Cyprus’s broader fiscal benefits. This guide examines how rental income is taxed, the deductions property owners can claim, and the obligations that landlords must fulfil under Cypriot law.

How Rental Income is Taxed in Cyprus

Property owners renting out real estate in Cyprus are required to pay income tax on their earnings, regardless of whether they’re residents or not. For residents, this rental income is part of their overall earnings and is taxed progressively, ranging from 0% for the first €19,500 to 35% on amounts exceeding €60,000 annually. The tax is applied to the net income after deducting allowable expenses. Non-residents also face taxes on rental profits at similar rates, but with added Special Defence Contribution (SDC) charges, amounting to 3% on 75% of the gross rent. However, certain exemptions may apply under specific conditions.

Progressive Tax Rates for Individual Property Owners

Individual landlords in Cyprus, whether residing on the island or abroad, are subject to personal income tax on their net rental profits, calculated according to a progressive rate system. Understanding these brackets is crucial for property owners to gauge their annual tax obligations and strategise effectively and accurately. Cyprus offers a generous 0% tax rate for income up to €19,500 annually. Earnings from €19,501 to €28,000 are subject to a 20% tax, while amounts between €28,001 and €36,300 are taxed at a rate of 25%. For those earning between €36,301 and €60,000, the rate rises to 30%, with any income exceeding €60,000 subject to a top bracket of 35%. These rates apply across all taxable earnings, not just rental income, so employment salaries or investment returns also impact which bracket your total income falls into.

Exceptional Defence Contribution on Rental Income

Beyond standard income tax, rental income in Cyprus might incur a Special Defence Contribution (SDC), specifically targeting passive earnings. Non-domiciled Cyprus residents are exempt from SDC entirely, including on rental income from Cyprus properties. However, domiciled Cypriots and non-residents are subject to SDC on Cyprus rental income at an effective rate of 2.25%. The SDC rate is effectively 2.25% of gross rents, calculated as 3% on three-quarters of the total rent. Both non-resident landlords and domiciled Cypriots are subject to this levy, in addition to their regular taxes.

GeSY Healthcare Contributions

Property owners residing in Cyprus are required to account for General Healthcare System (GeSY) contributions on their rental income. This levy, designed to support the island’s national health system, extends to various earnings, including rent. The GeSY rate is 2.65% of gross rental income for both employed and self-employed individuals, with an annual cap currently set at around €180,000 across all income sources.

Allowable Deductions and Expenses

One of the most valuable aspects of Cyprus’s rental income taxation is the ability to deduct legitimate expenses incurred in generating that income. These deductions reduce the gross rental income figure, thereby lowering the tax payable on net profits.

Mortgage Interest and Financing Costs

Mortgage interest payments on loans used to acquire rental property are fully deductible against rental income. This deduction can be substantial, particularly in the early years of a property loan when interest comprises a larger portion of monthly payments. The deduction applies only to interest, not principal repayments, and the loan must be directly related to the rental property.

Maintenance and Repair Expenses

Maintenance and repair costs represent another significant deductible category. Expenses for fixing wear and tear, repainting, plumbing repairs, electrical work, and similar upkeep activities can be claimed. However, capital improvements that increase the property’s value, such as adding a swimming pool or constructing additional rooms, typically cannot be deducted as current expenses.

Property Management and Professional Fees

Property management fees paid to agencies or professionals managing lettings and tenant relationships are fully deductible for tax purposes. Many landlords, especially those living abroad or managing multiple properties, employ management companies to handle day-to-day operations, which reduces their taxable rental income.

Legal and professional fees related to rental activities, including accounting costs for preparing tax returns, legal expenses for drafting lease agreements, and fees paid to advisors for compliance assistance, are deductible.

Insurance and Municipal Charges

Insurance premiums for property coverage, including buildings insurance and landlord liability policies, qualify as deductible expenses. Local authority charges, municipal taxes, and refuse collection fees levied by the local government are also allowable deductions.

Other Deductible Costs

Utility bills paid by the landlord rather than passed through to tenants may be deductible, depending on lease arrangements. Depreciation allowances, particularly on furniture and equipment provided within furnished rental properties, may be claimed over the useful life of these assets.

Filing Requirements and Deadlines

Property owners in Cyprus who derive rental income are required to register with the tax authorities and submit annual tax returns, declaring all rental revenues. The filing process has specific deadlines, and late submission can result in penalties and interest on unpaid tax amounts. The tax year in Cyprus runs from January 1st to December 31st. Returns for the previous tax year must typically be filed by 31st July of the following year. For example, the return for income earned in 2024 is due by 31st July 2025. Landlords must maintain adequate records supporting their rental income and claimed deductions. This includes lease agreements, expense receipts, bank statements with rental payments, and invoices for services or repairs. Tax authorities may request these documents during audits; failure to provide them can lead to the disallowance of deductions. Payment of tax owed typically occurs in two instalments: a provisional tax during the current year, based on estimated income, and a final settlement after filing the annual return.

Tax Treatment for Companies Owning Rental Property

Some property owners opt to hold real estate through Cyprus companies instead of owning it directly, a strategy that offers notable benefits. With a corporate income tax rate of just 12.5% on net profits, far lower than the top personal rate of 35%, this approach can be especially appealing for high earners with significant rental income. While individuals enjoy a tax-free threshold of €19,500, every euro earned by companies is taxed at the flat corporate rate. Thus, for those with modest rental earnings, individual ownership may lead to lower overall taxes. Cyprus companies also enjoy an exemption from SDC on local rental income, a perk not available to individuals. When profits are distributed as dividends to non-domiciled shareholders, they remain free from additional Cyprus taxation due to exemptions from both income tax and SDC.

Short-Term Holiday Rentals and Platform Lettings

The rise of platforms like Airbnb has transformed property owners into hosts, enticing them to offer their homes for short-term stays. While these rentals share the same tax treatment as long-term leases, they present unique challenges, such as VAT registration and compliance with tourism regulations. Short-term rentals often yield higher income but also demand more spending on cleaning, utilities, and upkeep. Once rental earnings surpass €15,600 annually, VAT registration is required. This means charging a standard 19% VAT on your rental income unless reduced rates apply. Additionally, hosts must comply with local tourism laws by obtaining the necessary licenses or permits. The frequent turnover and wear in holiday rentals often result in deductible expenses that exceed those of traditional lettings.

Non-Resident Landlords: Special Considerations

Foreign property owners who do not meet the requirements to be considered tax residents of Cyprus have specific obligations when they earn rental income in Cyprus. Understanding these requirements prevents compliance problems and ensures proper tax treatment. Even if they are not residents, they must submit tax returns in Cyprus declaring rental income. This income is taxed at the same progressive rates as residents, on net profits after allowable deductions. The 3% SDC charge, applied to 75% of gross rental income (effectively 2.25% of total rents), applies to most non-resident owners. This charge is added to the tax on net profits, creating a dual tax obligation. Double taxation avoidance agreements between Cyprus and the owner’s country of residence may provide relief through credits or exemptions for tax paid abroad.

The Role of Tax Residency Status

Tax residency has a profound influence on how rental income is taxed, particularly when combined with other sources of revenue. In Cyprus, establishing tax residency through the 60-day rule can be advantageous. To qualify, individuals must cumulatively meet all requirements: spend at least 60 days in Cyprus; not reside elsewhere for more than 183 days; not be tax resident in another country; carry out business in Cyprus, be employed in Cyprus, or hold a directorship in a Cyprus tax-resident company (continuing through 31 December); and maintain a permanent residential property in Cyprus (owned or rented). Non-domiciled residents enjoy exemptions on foreign-sourced dividends, interest income, and securities gains. For those with substantial investment returns alongside rental income, securing non-domicile status can result in significant tax savings, despite rental earnings being taxable in Cyprus.

Working with Professional Advisors

Navigating the maze of rental income taxation in Cyprus can be daunting, but C.Savva & Associates LTD makes it seamless for international property investors. Our expert team ensures tax compliance through precise annual returns and strategic deduction calculations while liaising smoothly with tax authorities. For those integrating property acquisition into broader Cyprus tax strategies, we expertly handle residency setup, company formation, and ownership structuring to maximise benefits. Our AML/KYC services simplify the process of opening bank accounts across the EU for efficient management of rental income. Partnering with Nicholas Ktenas & Co., LLC, we provide comprehensive legal support—from crafting lease agreements to managing company documents, ensuring every aspect of your property venture is covered efficiently and effectively.

Optimising Your Rental Income Tax Position

Cyprus is a hotspot for rental income, thanks to its appealing tax benefits and strategic deductions. With progressive personal taxes starting at 0% on the first €19,500 and a competitive 12.5% corporate rate for properties held by companies, Cyprus stands out in Europe’s property market. Navigating the tax landscape involves understanding key levies, such as income tax, SDC, and GeSY contributions, while maximising deductions. For those eyeing Cyprus as a rental investment or seeking tax residency with rental gains, expert guidance can ensure you capitalise on these advantages from day one. Reach out to our team to discover how Cyprus’s taxation framework can enhance your property investment strategy!